Cost plus is a way for business owners/executives/key employees to pay for Health & Dental expenses tax free.
Cost Plus is a claim that is:
- for an expense that is an eligible medical or dental expense under the Income Tax Act
- for an expense that is not covered or that exceeds the coverage provided under the Employee Group Benefits Plan
- for designated plan members ie. Owners/executives and their dependents who are covered under the Group medical or dental plan
- Cost Plus claims are limited to $50,000 per person per benefit year
- Claims submitted under the Cost Plus Benefits portion are not counted as part of the Group Benefits’ claims history and therefore don’t affect claims history or rates/premiums
- Claims submitted under the Cost Plus Benefits portion are 100% tax deductible to the company
Example of how Cost Plus works
Company ABC has a Group Benefit Plan
Mr. A is owner/president of the company and is on the designated list for Cost Plus eligibility.
He or a dependent requires $5,000 of dental work above what is covered on the Group Benefits Plan.
He pays the dentist the $5,000 and keeps the receipt. He completes the Cost Plus Claims form, submits it along with the receipt and a cheque from Company ABC made out to the Insurance carrier for $5,000 plus 10% administration fee plus appropriate taxes (all outlined on Cost Plus form). Because it is a company cheque, this total expense is considered part of the Group Benefits Plan and is 100% tax deductible. Again, this claim submission is separate and does not show up on the Group Plan’s claims experience.
The Insurance carrier sends a cheque back or direct deposits to Mr. A personally for $5,000. So, the expense is paid by the company and considered a business expense (as part of the Group Plan premium) and the amount is reimbursed personally to the claimant.